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The Changing Economic Models of Chaebol Capitalism   Term Paper ID:27210 Click to get this paper

Essay Subject: Examines the Korean economic situation during the 1997 crisis. Reviews the development of chaebol system, its decision making process, & links between chaebols & banks. Assesses the outlook for the future.... More...

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Paper Abstract: Examines the Korean economic situation during the 1997 crisis. Reviews the development of chaebol system, its decision making process, & links between chaebols & banks. Assesses the outlook for the future. Paper Introduction: The Changing Economic Models of Chaebol Capitalism Introduction and Problem Statement In late November, 1997, yet another horde of invaders landed on the Korean soil, this time wearing three-piece suits and carrying briefcases. These "invaders" were a large group of numbers crunchers from the International Monetary Fund and their target was the infusion of up to $55 billion in IMF funds to the ravaged Korean economy. Richard Lacayo, in the December 3, 1997 issue of Time Magazine points out: "Just a few weeks before they arrived, Seoul had been calling the idea of an IMF rescue unthinkable. Now the unthinkable is fully under way, and the fund's inspectors have become supervisors of the world's 11th largest economy" (Lacayo, 1997, 37). The real target of the IMF, Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. (1994). Nine years later, according to Kahn and Schuman, the debt level of thechaebols are among the highest in the world, with some of the "chaebolsstaggering under a debt-to-equity ratio of 4 to 1, a burden that wouldcripple most U.S. In considering the Korean banking industry and the economic system,the role of the government is one of the most critical issues. AsiaTimes Net. A1. Kim, who had worked withCitibank in Korea and U.S. To understand the chaebol'smacroeconomics, attention must first be paid to their microeconomics. At this point, it is helpful to learn the names and financialpositions (as of 1994) of the major players. Four years later, the situation had both improved and worsened. This lack of financial commitment to R&D is one of the situations thathas caused the current financial difficulties that are daily expressed inthe news media. Rebuilding the future. In1996, Korea gained membership in the Organization for Economic Cooperationand Development (OECD). Hereis a simplified breakdown of the main structures of these top five chaebolswith sales and profits figures in US dollars (Whitmore & Nakarmi, 1994).Hyundai:1993 Gross Sales: $8 .6 billion1993 Net profits: $2 9 millionCEO: Chung Mong KooComprised Major Companies: Hyundai Engineering & Construction, HyundaiHeavy Industries, Hyundai Motors, Hyundai Electronics Industries, HyundaiMerchant Marine.Primary Business Areas: Construction, automobile, shipbuilding, industrialplants, semiconductors, telecommunications, aerospace, shipping.Samsung:1993 Gross Sales: $71.2 billion1993 Net Profits: $234 millionCEO: Lee Kun HeeComprised Major Companies: Samsung Electronics, Samsung Petrochemicals,Samsung Display Devices, Samsung Co., Samsung Heavy Industries, SamsungElectro-Mechanics.Primary Business Areas: Electronics parts and display devices,construction, petrochemical products, shipbuilding, automobiles,semiconductors.Lucky Goldstar:1993 Gross Sales: $55.3 billion1993 Net Profits: $426 millionCEO: Koo Bon MooComprised Major Companies: LG Electronics, LG Semicon, LG IndustrialSystems, LG Petrochemicals, LG Construction, LG Telecom, LG Information andCommunications.Primary Business Areas: Telecommunications switching systems and terminals,industrial systems and equipment, petrochemicals, household chemicalproducts, semiconductors, consumer electronics.Daewoo:1993 Gross Sales: $45.3 billion1993 Net Profits: $422 millionCEO: Kim Woo ChoongComprised Major companies: Daewoo Corp., Daewoo Heavy Industries, DaewooTelecommunications, Daewoo Electronics, Daewoo Motor, Daewoo Securities.Primary Business Areas: Construction, automobiles, consumer electronics,shipbuilding, finance and brokerage, telecommunications equipment.Sunkyong:1993 Gross Sales: $31.5 billion1993 Net Profits: $346 millionCEO: Chey Jong HyonComprised Companies: Sunkyong Industries, Yukong Ltd., SKTelecom, SKC Ltd.Primary Business Areas: Chemical fibers, retailing, petrochemicals, oilrefining, magnetic media. Available: http://www.mpchronicle.com/daily/1997 811/11 8162.html Seoul's big splash: South Korean industry. Businesses defaulted on debts totaling $7.6 billion inthe first four months of 1997--a 5 % surge over 1996 (Nakarmi, 1997). However,as the current problems in the Korean economy are solved by the infusion ofcash from the IMF, (an infusion which is accompanied by strict oversightregulations and a commitment to follow stringent accounting and fiscalrules) the chaebols will be forced to also change and become less insular.In fact, this is already happening, according to an analysis of the newchaebol leadership (Shameen, 1996). This industrysector added tremendous revenues to the 1993 GNP, but also added a largeload of debt to South Korea's 1993 $8.5 billion trade deficit with Japan.In hindsight, the reason was simple. (1996, September 2 ). "The world is gettingmore competitive," says Korea Mobile Telecom president Seo Jung Uck, whosecellular monopoly Seoul has just ended. All this change canbe traced to the IMF bailout, which will give the Korean chaebol thebreathing space they need to regroup and become global competitors. Lacayo, R. John Koo, a cousinof the chairman's, runs LG Electronics. (1996). Koo Bon Moo, 51, assumed controlfrom his uncle. But the real question is whether Korea will use the IMF impetus to launch deeper reforms, affecting the chaebols. That is, if they can survive the potential threat posed by the pendingInternational Monetary Fund bailout. The chaebols and the Korean government willhave to ask themselves many questions over the next two to three years (orhowever long the IMF bailout takes). 11. In1985they were permitted to make use make use of the rediscount facilities ofthe Bank of Korea for export financing and to enter the investment trustbusiness. Korean economic development: An interpretive model.Journal of Asian Business. In line with this, various measures for liberalization andpromotion of competition in the financial sector were taken. The Changing Economic Models of Chaebol Capitalism Introduction and Problem Statement In late November, 1997, yet another horde of invaders landed on theKorean soil, this time wearing three-piece suits and carrying briefcases.These "invaders" were a large group of numbers crunchers from theInternational Monetary Fund and their target was the infusion of up to $55billion in IMF funds to the ravaged Korean economy. Available: http://www.pathfinder.com@@P-STIQYATDTz@Asiaweek/96/ 92 .html Whitmore, S. This kind of change, suggests asubstantial market ascent similar to the rise of the American market thatbegan with the restructuring in the early eighties. The chaebols that manufactured carswere so preoccupied with their own growth that they ignored developing theall-critical support industries necessary to manufacture their cars(Chaebol economy at stake..., 1997). (1997, November 24). The car company is drifting away from the otherthree enterprises, and soon the two halves will be as far apart as Hyundaiis from Halla, a former affiliate that is now the 15th-largest chaebolunder Chung In Yung, 76, another brother of Chung Ju Yung's (Shameen,1996).Lucky Goldstar This chaebol is the first to give management control to a thirdgeneration member of a founding family. 37(5). Shameen A. Korea has endured other invasions. With attitudes like that motivating and guiding the leaders of many ofKorea's leading chaebols, the assumption can be made that the chaebols arenot dying, nor dead, but are simply undergoing major structural changes.What will emerge on the other side of this current financial crisis is aKorea well-armed to face the world in the millennium. Indications are that both Daewoo andSamsung have hired consultants from Japan to help the chaebol make thetransition to Japanese-style management. 8:4. The myth of the miracle. The rest of the 25, differentparts were ordered from small and mid-sized manufacturers in Japan. Company chairman, Lee Kun Hee, puteach family member in charge of a specific industry. 333:7888 63(2). In order to increase the independence of banking institutions in fundoperations, direct credit controls through credit ceilings on individualbanks were replaced with indirect controls through the management of bankreserves. (1997, Winter). They stitch the gloves for workers who forgethe steel for the cars they produce. The crisis facing Seoul underscores how much faster and further Korea's economy has come than government economic policy has -- or, more to the point, the tight relationship between government and conglomerates (Kahn & Shuman, 1997, A1). Samsung Electronics Co.'s 1993deal to supply special types of memory chips to Japan's Oki Electric Co. To provide a more competitivefinancial environment, five new national commercial banks, the ShinhanBank, the Boram Bank, the Donghwa Bank, the Dongnam Bank, and the DaedongBank were established in the 198 's. AsiaWeek. "Ifa hired manager could maximize the value of shares," he says, "I'd let himrun the business, and play golf all day." Clearly, in today's tougherenvironment, Korea's new bosses are playing rougher. Madhya PradeshChronicle [On-line]. Kim's foreignforays are one reason its exports are growing 5 % to 6 % a year despite theslump. Available:http://web3.asia1.com.sg/timesnet/data/ab/docs/ab 852.html-Jan1. Going under in Korea. Guide to the groups: The peckingorder of the top 2 chaebol. 12:2 117-119. Duringthat period of time, the alleged enemy was Communism. References Chaebol economy at stake in Kia crisis. Kia Motors Corp. Could these situations have been predicted ahead oftime by management of these chaebols? 481-497. The Guardian. Now the unthinkable is fully under way, and the fund'sinspectors have become supervisors of the world's 11th largest economy"(Lacayo, 1997, 37). Add tothat, the falling Korean Won and rising public utility charges forced theconsumer price index up 5 percent over the previous year. Time. These words emphasize the dark side of the Korean economy, but fail torecognize that, historically, there were many positive benefits generatedby the "chaebol." The clamor has grown so great that economists andpoliticians, both around the world and within Korea, are calling for thedeath of the chaebol. Instead, the chaebol as an institution will be analyzed within fiveareas. With theCommercial Bank of Korea having already been turned over to private handsin 1972, the denationalization of all five leading commercial banks wascompleted. In the196 's and 197 's there was little capital, a lack of natural resources, alarge population, a low level of savings, and the economy was small inscale and simple in structure. That question is explored in thenext section. He finds that "this modelbred complacency, cronyism and corruption. Kahn andShuman note that "overcapacity now has hit most major industrial sectors;Korea has five big car makers to serve a small domestic market.Inefficient investments led to six leading chaebols seeking courtprotection from creditors this year, setting off a debt crisis" (Kahn &Shuman, 1997, A1). TheEconomist. . One way chaebol are coping is to split up their empires, as Samsunghas (Higgins, 1997; Shameen, 1996). South Korea boom turns to bust as bigcompanies fold. Such relationships, while common in Asia, worry Western bankingand credit executives and government officials. (1997, July 24). As Kahn and Shuman point out: The IMF. Part 5: Tomorrow's Chaebol At the beginning of this analysis, mention was made of the number ofparties -- the media, the government, and private citizens who are callingfor the death of the chaebol structure and its removal as an economicmodel. The remarkable growth of Korea in that time istruly attributable to the strong government's role. Korean government tax breaks and financial incentives emphasizingindustrial reconstruction and exports provided continuing support to thegrowth of chaebols during the 197 s and 198 s. And, for the most part, "know little of the 196 sera, when the late strongman Park Chung Hee forged the business-government-military alliance that underpinned the Korean economic miracle. Among specialized banks, the Korea Exchange Bank was privatizedin 1989. Richard Hornik, in the sameissue, points the finger of blame squarely on the top-down managementstructure that characterizes the Korean chaebol. Available: http://www.korea-np.co.jp/PK%2 fourth%2 issue/97 813 4.html Deep pockets: South Korean banks. Part 2: The Chaebols Close Up, examines thereasons why the chaebol grew into such an mega-economic model. Whether or not that will ever happen is speculationbeyond the scope of this research. As a result, the accountdeficit widened from $8.9 billion in 1995 to $23.7 billion in 1996. Kim, K.U. Kahn, J. A number of discriminatory restrictions on foreignbank branches in the domestic financial market have been ruled out. (1997, August 11). In December 1988, interest rates on loans ofbanks and non-banking financial intermediaries were deregulated along withthose on deposits with long mature rates. Accordingly, the Officeof Bank Supervision and Examination of the Bank of Korea, which is subjectto the instructions of the Monetary Board, is in charge of the supervisionand regular examination of banking institutions. Indications of these changes are evident throughout the Koreaneconomy, but have not received the same amount of press coverage that thecountry's problems have. How the newgeneration of chaebol chiefs aims to keep the Korean boom on track. An analysis by the Korea Economic Research Institute showed that justthree subsidiaries within the Hyundai chaebol were geared up to supplyparts necessary to assemble Hyundais. Tradition called for "blood" and not managerial talent to be thepromotion rationale within the chaebol. As a first step toward the liberalization of interest rates, theceilings on inter-bank call rates and the issuing rates of unsecuredcorporate bonds were lifted. In 1982, preferential loan rates by commercial banks wereabolished and a system by which banks are allowed to charge different ratesbased on the credit worthiness of the borrower was introduced in January1984. & Nakarmi, L. It will endure this one,and grow as a nation. Seoul meddles in the market. led inevitablyto decisions based on personal relations" (Hornik, 1997, 4 ). Alarge part of this philosophy has roots in Korea's past, conflicts with the"hungry giants" of China, Russia and Japan. & Schuman, M. He has made the group's department store chain Shinsegaevirtually independent under the management of one of his sisters (Shameen,1996).Hyundai Just like Samsung, this chaebol has turned into a semi-decentralizedorganization. After pointing out that over the past decade, all of the six topchaebol -- Samsung, Hyundai, LG, Daewoo, Sunkyong and Ssangyong -- havechanged executive leadership, Shameen then proceeds to introduce the newleaders. 4 . Government, chaebols endedpoverty but now they stifle economic growth. [On-line]. & Cayer, N. His eldest son Chung Mong Gyu, 34, runs Hyundai Motor,where his other sons work. Table one provides a list ofthe top fifty Korean chaebol companies, including some financialinformation about each.Table One: Snapshot of Top 2 Korean Chaebols(In US Billions of Dollars)| | | | | ||Name: |Founded: |Assets: |Debt: |Net Worth: || | | | | ||Hyundai |1947 |63 |51 |11.7 || | | | | ||Samsung |1938 |6 .2 |43.9 |16.4 || | | | | ||LG |1947 |43.9 |34.1 |9.8 || | | | | ||Daewoo |1967 |4 .5 |31.3 |9.3 || | | | | ||Sunkyong |1953 |26.9 |21.4 |5.7 || | | | | ||Sangyong |1939 |18.7 |15 |3.7 || | | | | ||Kia |1944 |16.8 |14.1 |2.7 || | | | | ||Hanjin |1945 |16.5 |14 |2.5 || | | | | ||Lotte |1967 |9.2 |6 |3.1 || | | | | ||Kumho |1948 |8.8 |7.2 |1.5 || | | | | ||Dong-Ah |1945 |7.4 |5.8 |1.6 || | | | | ||Halla |1962 |7.8 |7.5 | .4 || | | | | ||Doosan |1896 |7.6 |6.6 |1. Nakarmi, L. Richard Lacayo, in theDecember 3, 1997 issue of Time Magazine points out: "Just a few weeksbefore they arrived, Seoul had been calling the idea of an IMF rescueunthinkable. Although this patrimonial concept of ownershipand management might never change, indications are that the complexeconomic problems facing Korea will force the chaebol to adopt traditionalmanagement concepts to survive. |3.5 | .5 || | | | | ||Kolon |1957 |4.5 |3.4 |1.1 || | | | | ||Jinro |1924 |4.7 |4.6 | .1 || | | | | ||Kohap |1966 |4.33 | .7 | .6 |(Source: Whitmore & Nakarmi, 1994) Part 2: The Chaebols Close Up In 1993, the top five of the above chaebol--Samsung, Hyundai, Lucky-Goldstar (LG), Daewoo, and Sunkyong--accounted for 53.3 percent of thegross national product of South Korea. Not only would that act be premature and irrational, the chaebolstructure is too ingrained in the Korean mindset to be replaced. will start by helping South Korea solve its most urgent headache: foreign exchange. Time. A reasonably-balanced report of the crisis appeared in the November24, 1997 Wall Street Journal: Once, South Korea was the gold standard of developing economies, a land that went from poverty to riches in 35 years. outlay inabsolute terms - or about what General Motors alone spends on R&D (Hoon,1997, 71). (1997, October 23). (1997, December 3). Isolated from public opinion,just as they insulated bankers and businessmen from the market forces...the iron triangle of bureaucrats, businessmen and bankers... While this was effective for thefirst generation managers, subsequent generations have lost the focus oftheir ancestral founders. Chung Se Yung, the "honorary CEO" assumed that positionafter his older brother, Chung Ju Yung, who founded the chaebol, retired.Chung Se Yung actually leaves the major decisions of management to his manysons, most of who are young and who all have MBAs from various UnitedStates schools. TV maker Zenith, dramatically increasing LG'smarket presence (Shameen, 1996).Daewoo Only Daewoo still has its founder as chairman. The answer lies in what didn't happen. "Competition is good for consumers-- and companies too. Not only do most of the major banks have key chaebolexecutives on their board, the chaebols are major investors and/or ownersof many of the banks that they turn to for credit to finance theirexpansion. Applying tothe fund means a loss of economic sovereignty, which is no small matter forany country. Last year itpurchased the last U.S. Thesepolicies were aimed at enhancing economic efficiency by assigning a greaterrole to the market mechanism and by promoting competition in every sectorof the economy. [On-line]. And, in spite of thefierce rivalry among Korean groups, some are starting to cross the line toform strategic alliances with each other. Change of this magnitude is not merely an acceptance of a new economicphilosophy on which to base future models. Bureaucrats try to suppress consumerspending, the better for channeling savings to the companies" (Kahn &Shuman, 1997, A1). Hoon, S.J. Such situations made government control ofbanking highly efficient. Far EasternEconomic Review. Foreign invasion is a commonoccurrence in Korean history, and the way that the South Koreans survivedwas banding together in clans or families that fought against the "foreigndevils." That concept of protectionism was hard to dismiss, when SouthKorea began trying to build its economy following World War II. They are, for the most part, trained in America andinternationally-minded. In the 199 's, government kept its movement towards relaxed foreignexchange control by revising its foreign exchange control act andregulation. isthe first technology transfer to flow the other way. (1997, December 3). companies did: focus on their corespecialties, thereby becoming global leaders (Hoon, 1997). or European companies... This would be areflection in Korea of what U.S. (1997, June 12). It calls for a great deal offlexibility on the part of the managers of the chaebols themselves.Acceptance of the IMF funds presage this change, which will, in the longterm, result in the government and Korean companies having to deal with theinvestors (IMF) whose money is at risk. The real target of the IMF, despite those headlines,is nothing less than the Korean chaebol. Higgins, A. There is evidence thatthis is already being done. However, as theeconomy grew larger and more complex, government control becameincreasingly inefficient. HIMBCO Bank Report, 1996, (1997). Part 3: The Business of Chaebols Traditionally, the top management of the chaebols, although fiercelycompetitive with each other, shared one common trait: absolute distrust andfear of "outside" (Western or Japanese) capital or management ideas. Part 4: Banking onthe Chaebols, discusses the integrated links between banking and industry.Part 5: Tomorrow's Chaebol, deals with some of the suggestions constantlybeing made about the future of this economic model. Concerning the above breakdowns of the top five chaebol, it should benoted that none of the top five have specialized sub-companies specializingin research and development, the lifeblood of an industrial society. [On-line]. Both have American MBAs and Asianexperience. wants to be (Shameen, 1996). Lee, Y. Available:http://www.himbco.kr/englme 1.html. He has stated in numerouspress conferences and statements to the press that he has a grand plan torevitalize Samsung turn it into a global player. Exports reached just $129.7billion, while imports climbed to $15 .3 billion. Part 1: A Korean Economic Snapshot, positions that country withinthe world economic market. For instance, consider the financial impact of under-financed R&D on just one area: the Korean car industry. It is helpful at this point to see just who these"new" chaebol directors are, and what their philosophies are.Samsung Massive decentralization is the overall philosophy of Lee Kun Hee, 54,took over leadership from his father in 1987. Far EasternEconomic Review. LG is among the biggest Korean investors abroad, with venturesin Europe and the Americas aimed at gaining market access. The most important question iswhether the nation and its business structures are willing to adopt thenecessary financial reforms that would evolve them from a highlycentralized model to a more decentralized economic model (Hoon, 1997). AsiaWeek. Lee's personal interestscenter around the chaebol's electronics business and a new carmakingventure. Without it, we become fat and lazy." That, plainly,is not what the new Korea Inc. The Wall Street Journal. Can Seoul staunchthe corporate bloodletting? Thus, in the early 198 's, wide-ranging structural adjustments began ashift from government management to a market-oriented system. It has been widely reported that Korean PresidentKim Young Sam wants the chaebol to reduce their dominance over the economyso smaller companies get a chance. brokerages, has shaken up the group by givingpromotions and raises based on performance, not seniority. In addition to the economic crimes almost daily blamed on thechaebols, the South Korean economy has been the focus of world attentionbased on the troubling fact that, as of June 1997 more than 7, companieshad filed for bankruptcy protection, with the average reaching some 5 companies per day. In the Cold War and into the 196 s, the term "Southeast Asia DominoTheory" was often used in the headlines of media around the world. Leung, J. Chaebol dominate the Korean economy, growingout of the takeover of the Japanese monopoly of the Korean economyfollowing World War II (Chaebol economy at stake...., 1997). Available:http://pathfinder.com/AsiaWeek/97/ 613/biz5.html. Re-inventing Korea Inc. (1997, May 3) The Economist.342:8 15 65(2). [On-line]. 1996 wasalso a difficult year for the Korean economy. Also in 1996, South Korean carmakers suffered declines in sales of upto 2 % in their home market in 1997 as the economy slumped. What happened? 16 :43 7 (2). Quantum jumps in Indo-Korean trade. . Andthe fact that Korea's leaders -- bankers, bureaucrats, and chaebolexecutives have applied to the fund has strong implications. Available:http://www.pathfinder.como@e13a/DYAYATDQMVB7y /Asiaweek/ 97/1 1 /aag.html Since 1986, they have been entitled to make use of therediscount facilities for call loans. Korean economic power, they claim, remains concentrated in the handsof vast, family-run business groups, called chaebols, that rely on outdatednotions of "vertical integration for strength and that once used government-guided bank loans for growth. Part 4: Banking on the Chaebols The relationship between chaebols and banking has always been acuriosity in Korea. IMF to the rescue. As the argumentwent, "If one country topples to Communism, the other Asian countries willtopple like dominoes." Today, the domino theory is being resurrected inthe world press, but this time the perceived threat is Communism'ssometimes unruly twin, Capitalism, or to be more specific, a hybrid knownas "Chaebol capitalism" (Chaebol economy at stake..., 1997, 24). Now it is poised to take what may be the International Monetary Fund's biggest-ever bailout. (1997, October 22). As part of the IMF restructuring, it is possible that the chaebol willbe forced to sell non-core businesses and assets. In February, 1997, Moody's lowered the long-term ratings of threeKorean banks -- Korea First Bank, Cho Hung Bank and Korea Exchange Bankbecause of those institutions' deteriorating asset quality in the wake ofthe bankruptcy of Hanbo Iron & Steel. and DaewooMotor Co., for example, recently agreed to swap components and standardizespecifications on the parts they use (Chaebol economy at stake..., 1997). (1994, November 5). With more suchagreements undoubtedly on their way, Korea is likely to remain the land ofchaebol for many years to come (Chaebol economy at stake..., 1997). In a major effort to liberalize the banking sector, the governmentturned over the ownership of four national commercial banks to privatehands: the Hanil Bank in 1981, the Korea First Bank and the Bank of Seouland Trust Company in 1982, and the Choheung Bank in 1983. Japanese zaibatsu (conglomerates)like Mitsui and Sumitomo--which began as family-run operations havesuccessfully hired outside managers. The country has had numerous boom-bust cycles in the past, but its corporate system has evolved only modestly each time (Kahn & Shuman, 1997, A1). Leading factors affectinggovernment expenditure change: The Korean case. The heavy industries, electronics and tradingarms are under Chung Ju Yung's sons, also in their 3 s and 4 s with U.S.degrees under their belts. (1996). Part of that admission was based on the very realfact that the country's nominal GNP grew 1 .8 percent over the previousyear to equal US $48 .4 billion, or 11th highest in the world. Hornik, R. || | | | | ||Daelim |1939 |6.9 |5.4 |1.4 || | | | | ||Hyosung |1957 |4.9 |3.9 |1 || | | | | ||Haitai |1945 |4. As with any great economic change in a society, the success orfailure of the new ideas rests with the key managerial executives whocontrol the chaebols. To motivate domestic banks into improving their banking practices andmanagerial skills, the government has allowed 34 additional foreign bankbranches to open in Korea since 1981, bringing the total number of foreignbank branches to 72. Chaebols are also cross-pollinating. From the president's office tocorporate boardrooms, Korean leaders are wedded to economic ideals born ina 196 s dictatorship: hands-on government regulation, ceaseless corporateexpansion, and distrust of foreign capital and competition" (Kahn & Shuman,1997, A1). But Kim Woo Choong, arelatively young 59, has quit all executive posts and is abroad eightmonths of the year. In 1988, the output of the3 largest chaebol represented almost 95% of Korea's gross national product(Lee, 1996, 118). Other young members of the Koos and the Huhs, who co-founded LG 6 years ago, are in charge of affiliates. Public Budgeting &Financial Management. His university mate Yoon Young Suk, 58, now manages the group.Sangyong Milton Kim, head of the cement-based group's financial unit, is theyoungest brother of chairman Kim Suk Jun, 43. Part 3: TheBusiness of Chaebols, explores some of the strategic reasons why thechaebol leaders might have chosen the tactics they did. That bankruptcy put Korea First Bankin the position of seeing its long-term senior debt and deposit ratingsslip from Baa1 to Baa2. Part 1: A Korean Economic Snapshot Chaebol, which are credited with building the Korean economy andaccused of destroying that same economy, are conglomerates that arecharacterized by strong family control, authoritarian management, andcentralized decision making. Seoul announced that the Washington-based agency will provide a $2 billion standby facility, the first installment of a big, multination aid package aimed at helping the country get through a debt crunch. TheKorea Automobile Manufacturers Association estimated that six of thenation's seven car makers paid nearly $2 billion in royalties to Japan in1992. Also in early 198 's, entry barrierswere substantially lowered for such non-banking financial institutions asinvestment and finance companies and mutual savings and finance companies.As a result, the number of financial institutions increased sharply. And theyface different challenges: not the building of low-cost labor-intensiveindustries, but the upgrading of existing enterprises into higher-value,innovation- and technology-driven world-class players" (Shameen, 1996, 2 ). The Bank of Korea Act and the General Banking Act carry outgovernment's supervision and guidance over banks. "If a 29-year-old can bring in more business than a trusted and loyal 5 -year-old, I'drather have him as my manager," says Kim, 35, who has also promoted women.Nor is Kim averse to letting someone outside the family run Sangyong. Eventhough South Korea's R&D investment as a share of GNP now ranks with themost advanced countries, it's barely 6% of the total U.S. [On-line]. He can often be found in Eastern Europe, looking aftercar plants upgraded by Daewoo with some $2 billion in loans. [On-line]. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.